Aspects on the phase stability and mechanical properties of nitrogen deficient (Ti0.54Al0.46)N-y alloys were investigated. Solid solution alloys of (Ti,Al)N were grown by cathodic arc deposition. The kinetic energy of the impinging ions was altered by varying the substrate bias voltage from -30V to -80 V. Films deposited with a high bias value of -80V showed larger lattice parameter, finer columnar structure, and higher compressive residual stress resulting in higher hardness than films biased at -30V when comparing their as-deposited states. At elevated temperatures, the presence of nitrogen vacancies and point defects (anti-sites and self-interstitials generated by the ion-bombardment during coating deposition) in (Ti0.54Al0.46)N-0.87 influence the driving force for phase separation. Highly biased nitrogen deficient films have point defects with higher stability during annealing, which cause a delay of the release of the stored lattice strain energy and then accelerates the decomposition tendencies to thermodynamically stable c-TiN and w-AlN. Low biased nitrogen deficient films have retarded phase transformation to w-AlN, which results in the prolongment of age hardening effect up to 1100 degrees C, i.e., the highest reported temperature for Ti-Al-N material system. Our study points out the role of vacancies and point defects in engineering thin films with enhanced thermal stability and mechanical properties for high temperature hard coating applications. Published by AIP Publishing.Funding Agencies|European Unions Erasmus Mundus doctoral program in Materials Science and Engineering (DocMASE); Swedish Research Council [621-2012-4401]; Swedish government strategic research area grant AFM - SFO MatLiU [2009-00971]; VINNOVA [2013-02355]; DFG; federal state government of Saarland [INST 256/298-1 FUGG]; European Regional Development Fund [AME-Lab C/4-EFRE-13/2009/Br]